Treasury-milking schemes are of two kinds. Those where national assets and natural resources are sold or contracted out, resulting in monies that should rightfully fill the state coffers being diverted instead into private bank accounts of, and property purchases by, ministers, lackeys, and officials entrusted with responsibility to administer the public good (2G, Coalgate, etc). The other kind of financial boondoggle relates to pay-offs by foreign companies and other entities bagging huge contracts for capital systems and construction (Commonwealth Games, turn-key projects). Most such high-value deals fly in under the radar of public scrutiny, quietly ripping off the exchequer. Then there are central ministries, such as power and industry, where corruption is reportedly so entrenched and institutionalised, and the system of pay-offs works with such clockwork precision, there is not a whiff of controversy anywhere, with the vendors allowed seamlessly to pad the contracts.

Owing to their ramifications for national security, big defence deals are more in the public eye, and the sensitivity of even the most corrupt governments to perceptions of wrongdoing is high, but so is the brazenness with which monies are siphoned off. The temptation is so great and the opportunity for making a quick buck so easy, it was only a matter of time before a serving armed service chief was caught with his hand in the cookie jar. Rather than be palmed off with pennies Air Chief Marshal S P ‘Bundle’ Tyagi, apparently decided during his term as chief of the air staff (CAS) to play ball with a view ultimately to raking in the pounds. As the Ministry of Defence ‘White Paper’ states, Tyagi re-wrote the specifications in 2005 enabling the Italian firm, Finmeccanica, to sell a dozen AugustaWestland AW-101 helicopters valued at some Rs 3,600 crore, for the VVIP fleet. ‘Bundle’ Tyagi’s strangely named cousins — ‘Julie’ and ‘Dosca’ among them, with Julie, by his own admission, already in the business of middlemaning deals with the power ministry, came in handy. Once retired, the ex-CAS, Tyagi, formally commodified his potential reach into the military by setting himself up as ‘consultant’ for foreign arms suppliers.

Documents from scams, scandals, and loot-minded contracts for foreign sourced-military hardware during Congress rule late 1980s onwards, reveal certain distinguishing features common to all of them, which were first evidenced in the deals for the German HDW-209 diesel submarines, the Italian AugustaWestland WG utility helicopters for the public sector Pawan Hans company and, of course, the Swedish Bofors FH-77B 155mm howitzers, the last-named rendered iconic in the annals of Indian corruption. ‘The family’, Milan, complicated play-making replete with a string of shadow and dummy companies facilitating payoffs, Indian middlemen (with Abhishek Verma’s Bermuda-based Atlas group of companies, having close Congress connections, always in the picture), shady European agents working for vendor firms (Ottavio Quattrocchi who is persona non grata, but not his son who, reportedly, is in Delhi often enough to maintain old contacts and operates out of Le Meridean Hotel when in town; the Britisher Christian Michel, and the Swiss duo Guido Haschke and Carlo Gerosa) are the constants.

It is not hard to speculate what happened. Haschke, who had previously dealt with Julie Tyagi for power systems, must have firmed up the Tyagi-cousin route to the IAF chief, while Verma, worked to bring in ‘The family’ into the loop as guarantor of the deal. ‘Bundle’ Tyagi (ironically, his last name means someone who sacrifices!) must have reckoned that the role of the ruling party bigwigs provided him political cover. ‘The family’ and the minders of its monies, in turn, must have calculated that with the CAS in the game, they had an insurance against the deal being faulted on technical/military grounds. Central to the deal going through was Finmeccanica meeting the demand of ‘The family’ for Rs. 200 crore. This pay-off was obviously an after-thought requiring the agents to do something unheard of in the business — reduce their own commissions to enable the deal to go through. Knowing how the marbles are stacked in New Delhi, the Europeans would do this for ‘The family’, but surely not for the inconsequential Family Tyagi.

Since the HDW-Bofors deals the modus operandi of Congress governments is clear. The pick is made at the highest level from the shortlisted hardware, which choice, the government approves and the concerned armed service then swallows. The deputy chiefs of staffs of the three armed services, with responsibility for procurement, can prove a hurdle. Here’s the point about the AW-101 deal: Not all deputy chiefs become service chiefs, but seniority decreed that Air Marshal N A K Browne, DCAS at the time of these shenanigans, was in line for the top post. By protesting or making an adverse noting, Browne could have nixed the deal. This he didn’t do, perhaps, fearing that an angry Tyagi and an upset Congress government might contrive to spoil his chances (as has occurred in other cases).

As the administrative head of any armed service, the chief of the staff can ruin promotion prospects of senior officers by moving them to relatively unimportant posts and diluting service records. Browne could have voiced his apprehensions directly to the defence minister. The problem with this option, according to a former army vice chief is that in such a situation the rest of the principal staff officers, as usually happens, side with the chief, whence the deputy chief’s motivation for questioning the purchase of the selected piece of hardware becomes an issue. Deputy chiefs, therefore, prefer to not upset the applecart. Outside the military, the entire defence ministry bureaucracy is a pliant instrument in the hands of the political masters. In the event, per the vice chief I talked to, “It is not possible for any corruption to happen without the defence ministry and the military services knowing about it.” This is to say that the military and the civilian bureaucracy are equally complicit in all defence scams and scandals. That is defence procurement politics in India.

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About Bharat Karnad

Senior Fellow in National Security Studies at the Centre for Policy Research, New Delhi, he was Member of the (1st) National Security Advisory Board and the Nuclear Doctrine-drafting Group, and author, among other books of, 'Nuclear Weapons and Indian Security: The Realist Foundations of Strategy', 'India's Nuclear Policy' and most recently, 'Why India is Not a Great Power (Yet)'. Educated at the University of California (undergrad and grad), he was Visiting Scholar at Princeton University, University of Pennsylvania, the Shanghai Institutes of International Studies, and Henry L. Stimson Center, Washington, DC.

4 Responses to Pelf & procurement politics

Mr. Karnad, this is one of the most honest (and yet cautious), and damning indictment of corruption in arms deals being a very grave threat to India’s national security and national integrity. The recent “outing” of the August-Westland fraud at the time of David Cameron’s visit to India might not be a mere coincidence. It appears to be an explicit attempt to blackmail the Congress to accept the Eurofighter instead of the much more capable and developed Rafale.

Incidentally, I was told by very credible persons that Massimo Quattrocchi (son of the criminal fugitive Ottavio Quattrocchi) whose office is located in the West Wing of the Le Meridian hotel in New Delhi is a “senior consultant/adviser” for ENI Italy which was granted virtually exclusive licences for “for oil exploration” in Andamans & Nicobar area, which happens to be a highly strategic and sensitive location, shortly after the Congress led UPA came to power.

As is well known, ENI is the owner of Snamprogetti (of Ottavio Quattrocchi infamy). Further, I have personally seen photographs of Massimo Quattrocchi in the “jolly company” of Abhishek Verma (and his wife/paramour,whatever……..). At the very least, one can venture an educated guess as to how deep and high the rot has penetrated!

Mr Karnad. For once, thought i agree with you partially, i do not agree entirely. While, as usual, you make several perfectly valid and pertinent points, there are several others that need to be factored in. Please do not overplay the role of the Air Force brass in this role. Undoubtedly, the part played by the former chief, Tyagi, is , to say the least, despicable and, if found guilty as charged, he deserves no sympathy. As for painting all the rest in the same brush,it is a too harsh. The specifications, as per newspaper reports, were changed, nay, directed to be changed by no less a person than the then NSA. Thereafter, it appears that certain unscrupulous elements jumped in to cash in on the opening. The fact that that the product is good is already a given. and even after that, it appears that foreign vendors feel that bribes have to be paid, if the deal is to be inked. The challenge before the decision makers is to change this widely held perception in the rest of the world.

The ‘system’, as such, today comprises of politicians, the civil servants and the Armed Forces( the latter limited to articulating the technical parameter and thereafter testing it). The general public is quite oblivious of the actual machinations of the decision making process. So actually that is the rub and ironically, the very important cog that needs to initiate the cleansing system, that is the elected representatives is reluctant, or rather appears to be, and that’s the problem!!!!